The International Monetary Fund urged Lebanese authorities on Monday to unite around a government rescue plan and warned that attempts to lower losses from the financial crisis could only delay recovery.
The government’s rescue plan has served as the cornerstone of talks with the IMF and maps out massive losses in the financial system.
The talks have been bogged down by a row over the scale of financial losses that have embroiled the government, the central bank, commercial banks, and lawmakers from Lebanon’s main political parties. “It is very important that the authorities unite around the government plan. From our side, we are ready to work together with the authorities to improve the plan where this is necessary,” said Athanasios Arvanitis, deputy director of the IMF’s Middle East and Central Asia Department.
Lebanese Finance Minister Ghazi Wazni said last week the talks were on hold pending the start of economic reforms and agreement on the losses.
Arvanitis said in an online press conference that delaying taking action would only worsen the outlook for the economy.
“However we’re also worried that attempts to present lower losses and postpone difficult measures into the future would only increase the cost of the crisis by delaying the recovery,” the IMF official said.
Alain Bifani, a senior member of Lebanon’s negotiating team with the IMF, resigned as finance ministry director-general last month, saying vested interests were undermining the government’s economic recovery plan. He said the losses stood at $61 billion.
Nafez Zouk, emerging markets strategist at Oxford Economics, said there had recently been push back within parliament against proposals put forward by Lebanon’s banking association to avoid a default on internal debt. There had also been push back with the assembly against the central bank’s stance to view losses as sums to be carried forward against future revenues, he said.
An adviser to the banking association, who declined to be identified because they were not authorised to talk on the record, said: “Past losses of the financial sector are interesting but irrelevant to either an IMF program or a debt restructuring.”
“The reason is that such losses are a subset of the outstanding liabilities and have already been financed.”